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Arizona Incentives and Workforce Development Guide

Visit Real Street's website to learn more about this event. The updated Arizona incentives guide is brought to you by Real Street Expo, a new event sponsored by Business Facilities and Today’s Facility Manager magazines.

For a list of Arizona economic development agencies that can help with the site selection process, visit our Online Site Seekers’ Guide.

In addition to our aggressive incentive programs, Arizona is committed to attracting and supporting quality companies through competitive tax policies and has demonstrated a continued trend of reducing property, individual sales and corporate income tax rates:

  • Among the lowest corporate income tax rates in the country. 30% reduction in Arizona’s corporate income tax rate, which decreases from 6.97% in 2014 to 4.9% by 2017.
  • Sales factor further reduces corporate tax burdens. 100% electable sales factor for multi-state corporations (increasing from 80% to 100% between 2014 and 2017).
  • Improved accelerated depreciation schedules. Five-year accelerated depreciation schedules reduce corporate tax burdens. This allows many companies to recover investments more quickly, significantly reducing personal property’s full cash value, and taxes owed, over five years.
  • 97% increase in personal property tax exemption.

FINANCING

Arizona Innovation Accelerator Fund:
$18.2 million loan participation program fostering business expansion and job creation in Arizona by providing debt financing for small businesses (in collaboration with private finance partners).
Arizona Innovation Challenge:
$3 million awarded annually ($1.5 million twice yearly) to the most promising technology ventures ($100,000 – $250,000 per company) to help promote and fund Arizona innovation.
AZ Fast Grant:
Up to $7,500 grant to pay for consulting services to advance Arizona-based technology companies.
AZ State Trade and Export Promotion Program (STEP):
Export assistance grant for small businesses as they export their products for the first time or expand to additional export markets.

TAX INCENTIVES

Quality Jobs Tax Credit:
$9,000 income tax credit for each qualifying new job. It is a credit equal to $3,000 per year for three years for each new qualifying job
  • Metro: Capital investment of at least $5 million and at least 25 new jobs
  • Rural: Capital investment of at least $1 million and at least 5 new jobs
Research and Development Tax Credit:
Income tax credit for investing in R&D in Arizona.The 2011 through 2017 R&D tax credit will be equal to 24% of the first $2.5 million in qualifying expenses plus 15% of the qualifying expenses in excess of $2.5 million. For 2018 and thereafter, the tax credit rates will be 20% of the first $2.5 million in qualifying expenses plus 11% of the qualifying expenses in excess of $2.5 million. It is equal to 34% of qualifying expenses when made in conjunction with an Arizona public university Companies with fewer than 150 employees may take 75% of the credit as a cash refund.
Qualified Facility Tax Credits Program:
Refundable income tax credit for a manufacturing facility or a manufacturing-related research or headquarter facility. Credit is equal to 10% of the capital investment in a new facility or $20,000 per qualified new job created, whichever is less. 51% of new jobs must pay wages of at least 125% of the state median.
Sales Tax Exemptions for Machinery and Equipment:
Available for:
  • Machinery/Equipment used directly in manufacturing
  • Equipment or transmission lines used directly in producing or transmitting electrical power, but not including distribution
  • Machinery or equipment used in research and development
Computer Data Center (CDC) Tax Exemptions:
Program to provide tax relief to CDC owners, operators and co-location tenants. It is available on purchases of CDC equipment for up to 20 years for qualifying CDCs that are certified by the Arizona Commerce Authority. Investment requirements at a new or expanding CDC:
  • $50 million in new investment if the CDC is located in Maricopa or Pima county; or
  • $25 million in new investment if the CDC is located in any other county
Angel Tax Credit:
An income tax credit of up to 35% is available for investments of at least $25,000 in an Arizona Commerce Authority-certified small business. Beginning 2014, any capital gains income derived from a qualified investment under the Angel program will be exempt from taxation in Arizona.
Renewable Energy Tax Incentive Program:
Refundable income tax credits and property tax reductions for companies engaged in the solar, wind, geothermal and other renewable energy (RE) industries when the facility is for RE manufacturing or RE headquarters operations:
  • Tax credit of up to 10% of qualifying expenses
  • Up to 75% reduction in real and personal property taxes for up to 15 years
  • New jobs must pay wages of at least 125% of the county median
Renewable Energy Production Tax Credit:
Income tax credit awarded to utility-scale generation systems based on the amount of electricity produced annually for a 10-year period using solar light, solar heat, wind or certain types of biomass. The income tax credits established are intended to promote investment in renewable energy production using low-emission and zero-emission electricity generation technologies. The credits are only for qualified energy generators with at least 5 megawatts generating capacity.

For wind or biomass derived qualified energy resource the amount of the income tax credit is:

1¢ per kilowatt-hour (kWh) of the first 200,000 megawatt-hours of electricity produced. (200,000 megawatt-hours of electricity equals 200 million kWh which, when multiplied by 1¢ per kWh, equals $2 million in credit.) The tax credit cannot exceed $2 million dollars per year per facility that produces electricity.

For solar light derived or solar heat derived qualified energy resource the income tax credit is:

4¢ per kWh in the 1st and 2nd calendar years in which the qualified energy generator produces electricity, 3.5¢ per kWh in the 3rd and 4th years, 3¢ per kWh in the 5th and 6th years, 2¢ per kWh in the 7th and 8th years, 1.5¢ per kWh in the 9th year, and 1¢ per kWh in the 10th calendar year in which the qualified energy generator produces electricity. The tax credit cannot exceed $2 million dollars per year per facility that produces electricity.

Commercial and Industrial Solar Tax Credit Program:
Income tax credit for companies installing a solar energy device at an Arizona facility. The tax credit is equal to 10% of the installed cost of the solar energy device not to exceed $25,000 in credits for one building in a single tax year and $50,000 total credits per business per tax year. Tax credits can be used to offset Arizona income tax liability; any unused credit amounts can be carried forward for a five-year period.
Military Reuse Zone (MRZ):
A Program established to lessen the impact of military base closures. Currently there are two MRZs in Arizona. In 2001 the MRZ designation was renewed for the former Williams Air Force Base, now known as Williams Gateway Airport. In December 2002, the former U.S. Naval Air Facility in Goodyear, now known as Phoenix/Goodyear Airport, was designated as an MRZ. An applicant for the MRZ program must be located within an MRZ to qualify for the benefits. The program offers three types of benefits:
  1. Transaction Privilege Tax Exemption – Exemption from transaction privilege tax on contracts for certain types of construction at an MRZ
  2. Tax Credits – Arizona income/premium tax credits for up to five years for each net new job created, totaling up to $7,500 per non-dislocated employee and up to $10,000 per dislocated employee
  3. Property Reclassification – Both real and personal property can be reclassified from class one (20% assessment ratio) to class six (5% assessment ratio), which may result in property tax savings of up to 75% for a period of five years
Foreign Trade Zone (FTZ):
Up to a 75% reduction in state real and personal property taxes for businesses located in an FTZ. Other benefits include: duty free zone, no time constraints on storage, shorter transit time (direct delivery), and weekly entries.
Private Activity Bond:
Issued to finance construction and equipment purchases associated with industrial and manufacturing facilities, residential rental projects, facilities for the furnishing of water, sewage and solid waste facilities and more. Interest on private activity bonds may be exempt from federal income tax for most bondholders.

WORKFORCE DEVELOPMENT

Robust Workforce Development Assistance:
No-cost workforce assistance:
  • Immediate access to job-ready talent pools
  • Skill assessments and talent screening
  • Human Resource consulting on Arizona’s labor laws
  • Custom recruiting services
  • Transition and retention services
  • Training grants for new hires and incumbent employees

Job Training Grants:

Grants to employers implementing job-specific training plan. The maximum grant is $1.5 million, not to exceed $5,000 per employee trained in metro areas and $8,000 per employee trained in rural areas

  • New employees: reimbursement of up to 75% of approved training expenses
  • Current employees: reimbursement of up to 50% of approved training expenses

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